STL Home Journey
George Kindler
The VA appraisal came back with conditions. The seller will not fix them. Here are your three options and what happens to your earnest money.
The VA appraisal came back. The home did not meet Minimum Property Requirements. The appraiser identified conditions that must be fixed before the loan can close. You sent the report to the seller. The seller said no.
This is when most VA buyers panic. You have earnest money at risk. Your contract has a deadline. The seller is not cooperating. What happens next?
You have three options. Each has consequences. Here is what you need to know.
The cleanest outcome is the seller agrees to fix the appraisal conditions before closing. The seller hires a contractor, completes the work, provides proof of completion to the appraiser, and you close on schedule.
This happens when the seller is motivated to close, the repairs are minor, and the cost is reasonable. If the appraisal conditioned a loose handrail or peeling paint on a porch rail, the seller might agree to fix it for $300 rather than lose the deal.
But if the appraisal conditioned a $3,500 panel replacement or a $10,000 roof, the seller will probably say no. At that point you are negotiating. The seller wants you to pay for it. You want the seller to pay for it. Someone has to give or the deal dies.
Yes, but both parties have to agree. If the seller agrees to fix the issues but needs extra time to complete the work, you can sign an extension addendum that pushes the closing date out by 7 to 14 days.
The problem is that extensions create risk. If the contractor runs late, if the city inspector is backed up, or if the work fails the final inspection, you are stuck waiting. Your financing approval might expire. Your rate lock might expire. And the seller might change their mind.
The second option is you pay for the repairs yourself and close on the home. This only makes sense in two scenarios.
Scenario one: the repairs are minor and you have the cash. If the appraisal conditioned $800 worth of work and you have $800 sitting in your savings account, you can pay for it and move on. You preserve the deal and avoid starting over with a new property.
Scenario two: the home is priced well below market and the repair cost still leaves you with equity. If you are buying a home for $180,000 that appraises for $200,000 and the repair cost is $5,000, you are still ahead by $15,000. That might be worth it.
What does not make sense is paying for repairs that eat all of your equity or force you to drain your emergency fund. Most VA buyers are using a VA loan because they do not have a large down payment saved. If you do not have the cash to cover the repairs without financial stress, this is not a good option.
The third option is you terminate the contract under the VA financing contingency and get your earnest money back. This is the most common outcome when a VA appraisal fails and the seller refuses to fix the issues.
The VA financing contingency is built into every VA purchase contract in Missouri. It states that if the appraisal identifies conditions that cannot be met, you can terminate the contract and recover your earnest money.
The seller cannot keep your earnest money if the appraisal fails. The financing contingency protects you. Your agent will send a termination notice to the seller and the title company. The title company will release your earnest money back to you within 5 to 10 business days.
The deal is dead. You walk away. The seller re-lists the home or finds another buyer. You start over with a different property.
This feels like failure but it is not. You avoided buying a home with unresolved safety issues at a price that did not account for the cost of repairs. The VA appraisal protected you from a bad deal.
No. The VA financing contingency gives you the legal right to terminate if the appraisal identifies conditions that cannot be met. The seller cannot sue you for exercising that right.
What the seller can do is refuse to release your earnest money. This happens when the seller claims you did not follow the proper termination procedure or that the financing contingency does not apply. If this happens, your agent and the title company will work to resolve it. In most cases the earnest money is released without legal action.
If the home passes the MPR inspection but the appraised value is lower than the contract price, that is a different issue. The VA will only lend up to the appraised value, not the contract price.
Example: you offer $190,000. The appraisal comes back at $185,000. The VA will only finance $185,000. You need to come up with $5,000 in cash to cover the appraisal gap or the seller needs to reduce the price to $185,000.
Most VA buyers do not have $5,000 in cash sitting around. If the seller will not reduce the price, you terminate under the financing contingency and get your earnest money back.
Your contract will specify a financing contingency deadline. This is usually 21 to 30 days from the date the contract is signed. If the appraisal comes back with conditions and the deadline is approaching, you need to decide quickly.
Do not wait until the last day. If you wait too long, the seller might claim you waived your financing contingency by not terminating in time. Get contractor bids immediately. Send them to the seller. Negotiate. If the seller will not fix the issues and you cannot afford to pay for them, terminate before the deadline expires.
When a VA appraisal fails in St. Louis, you have three options. The seller fixes the issues. You pay for the repairs and close anyway. Or you terminate the contract and get your earnest money back.
Most sellers will not pay for unexpected repairs. Most VA buyers do not have the cash to cover them. That leaves option three. Terminate and start over.
What sellers typically agree to pay for repairs after inspections in St. Louis. Average Price Reduction After Inspection in St. Louis → →This is not failure. This is the VA appraisal doing its job. It protected you from buying a home with safety issues at a price that did not account for the cost of repairs. Walk away and find a property that passes the appraisal without seller resistance.
What VA buyers actually pay at closing in St. Louis and how to budget for it. Buyer Closing Costs in St. Louis → → A good agent negotiates repairs and extensions when appraisals come back with conditions. What a Buyer Agent Actually Does in St. Louis → →What if the seller offers to split the repair cost with me?
You can negotiate a split if you have the cash to cover your half. If the repair costs $4,000 and the seller offers to pay $2,000, you need $2,000 in cash. If you have it and the home is worth it, this might be a reasonable compromise. If you do not have it, you terminate.
Can I ask the lender to increase my loan amount to cover the repairs?
No. The VA will only lend up to the appraised value of the home in its current condition. If the appraisal identifies $5,000 in repairs, the VA will not increase your loan by $5,000 to cover them. The repairs must be completed before closing or you need cash to cover them.
What if I already paid for the appraisal and the inspection?
Those costs are not refundable. You lose the appraisal fee and the inspection fee if you terminate the contract. This is why screening properties before writing offers is so important. If you avoid homes with obvious VA appraisal issues, you avoid losing $800 to $1,000 on failed deals.
How many times can I use the VA financing contingency?
As many times as you need. Every VA purchase contract in Missouri includes a VA financing contingency. If the appraisal fails, you can terminate and get your earnest money back. There is no limit on how many times you can do this.
This is one piece of the St. Louis home buying process. See how it all fits together:
📚 Complete St. Louis Buyer Guide →
Grew up in South St. Louis, lived in Dogtown for 6 years, now in South County. You'll find us at White Flag Church on Sundays. This is my city, and I know it well.
I have walked VA buyers through failed appraisals in St. Louis. I know when to negotiate, when to walk, and how to protect your earnest money. If a VA appraisal comes back with conditions, I will get you contractor bids, present them to the seller, and help you decide whether to close or terminate.